A lot of people are wondering why Nokia didn't choose to go with Android. How can Nokia differentiate themselves when Android is a lot more open and free than Windows Phone 7? As usual, the key to this is in the details. If you read the announcements carefully, you'll see that Microsoft offered Nokia something Google most likely didn't. Update: What a surprise. Elop just confirmed Nokia has a special deal with Microsoft. Whereas HTC, Samsung, and so on are not allowed to customise WP7 - Nokia is, further confirming my theory.

The decision to partner with Microsoft is not good, But better than choosing Android. Everyone else already has it. But the move to Microsoft is a bad one.
Around 2006/2007 Nokia won the battle in the smartphone department from Microsoft. But was almost instantly beaten by Apple, Blackberry and later Android.
Since then Nokia struggles and makes many bad decisions.
Nokia is/was king with mobile keyboard input.
Their transition to touchscreen is/was bad with series 60 v5 & symbian ^3.
They gave up Maemo to easily and teamed up with Intel in Meego. There was even talk about an atom based phone! How weird is that?
Maemo was almost there and then Nokia screwed up with Intel, because integrating software takes ages. It's not Lego.

Their real power lies in dumb-phones and Nokia is still king in this department. The real challenge for Nokia should be to sell smart-phones to the dumb-phone user base! And Nokia has the perfect OS for a smart dumb-phone.